A company's total manufacturing cost is the amount of money spent to manufacture products in a given period. Understanding the total manufacturing cost is crucial because it can be compared to total revenue and ultimately used to determine your business' profitability. This is especially important for small businesses that might not have the luxury of a financial safety net. The basic formula for calculating total manufacturing costs is to add the costs of your direct labor, direct materials and manufacturing overhead.

Determine the total cost of materials directly used for manufacturing. This includes all of the raw materials that actually go into the finished product. For example, if your business manufactures wooden furniture, this category of expense would include all of the wood that ends up in the furniture; all of the nuts, bolts, screws or glues that hold the furniture together; and any paint or varnish that ends up on the finished product. The sum of these is the total cost of direct materials.

Calculate the total cost of labor directly related to manufacturing. This should include not only the salaries of all workers employed in manufacturing, but also any benefits they receive.

Determine the total cost of manufacturing overhead. This is by far the most time-consuming part of calculating the total cost of manufacturing. To account for all sources of manufacturing overhead, you will need to consider each of the following expenses: Indirect Labor. This includes the salaries and benefits of any workers who are not directly involved in manufacturing, but whose labor is nonetheless necessary to the manufacturing process. For instance, supervisors, janitors and in-house quality inspectors would fall into this category. Indirect Materials. Any materials used to maintain or repair the manufacturing equipment or building fall into this category. This includes fuel used during the manufacturing process. Utilities. Any utilities that keep the manufacturing facility operational fall under manufacturing overhead costs. These will most likely include telephone and Internet service, water, sewage and electricity. Repair and Maintenance. Any money spent on the repair or maintenance of machinery or the building itself should be included in total manufacturing overhead. Taxes and Insurance. Any taxes paid on property related to the manufacturing process is overhead. Any costs related to property insurance or insurance on assets related to the manufacturing process are also included in manufacturing overhead. Money lost through depreciation of assets or stolen assets should also be considered manufacturing overhead. The sum of all these costs is your total manufacturing overhead.

Add your totals for steps 1, 2 and 3. This figure represents your total manufacturing costs for the period.